Box C: Human Capital and Stagnating Productivity in the United Kingdom

Aditya Goenka and Lin Liu

National Institute UK Economic Outlook, 2025, issue 19, 43-48

Abstract: Over the past two decades, the United Kingdom has persistently underperformed on productivity, with GDP per hour worked growing by just 0.6 per cent per annum between 2007 and 2019 – below the OECD average of 1.2 per cent. This 'productivity puzzle' has profound implications for living standards, fiscal sustainability, and global competitiveness. Human capital encompassing the knowledge, skills, and health of the workforce, is widely recognized as a key driver of productivity: a healthier, better–educated workforce generates greater innovation, adapts more rapidly to technological change, and sustains higher output per worker. The relative decline in UK human capital – specifically in higher–education enrolment and health outcomes – accounts for a substantial share of its productivity shortfall.

Date: 2025
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